Bitcoin’s Open Secret: Lightning Is Making Better Online Payments Possible

That may have been a rallying cry for early Bitcoin believers who saw the cryptocurrency as a superior form of payment, but excitement tapered off as Bitcoin ran up against technical limitations. Yet, the idea may now be coming back in vogue – apps being built on the layer-two technology lightning network, which this year entered beta, already showcase transactions traditional payments systems just can’t do.

In that way, the technology might allow the cryptocurrency to leapfrog the card networks and other payment startups using traditional rails. The application that’s getting the most attention is the ridiculously small digital payments lightning makes possible for the first time.

For instance, an app called SatoshiTweets allows users to pay a very small fee via the lightning network to send a tweet from a shared Twitter account.

After using the application, one user tweeted:

“I bought an exclamation mark.”

The user noted that the punctuation cost 10 satoshis, worth a fraction of a fraction of a penny.

While a paywall for tweeting might sound like a user-experience nightmare, SatoshiTweets has drawn excitement for its novelty nonetheless – primarily because these kinds of transactions are unheard of through the payments systems that have mass adoption today.

That’s because sending a digital payment isn’t without cost, even if it isn’t always passed directly onto the user.

PayPal, for example, charges $0.05 plus a percentage fee per transaction. In other words, if you were to make a payment that small, PayPal’s fees would eat the entire transaction, making it nonsensical to execute.

Teeny-tiny payments might not sound all that compelling (some argue the mental costs are too high), but researchers working closely to the cryptocurrency now believe it could open up an array of new business models and maybe even enable some more sci-fi-sounding use cases.

As such, lightning’s ability to make the dream of Bitcoin outpacing the traditional, centralized payment giants a reality is spawning all sorts of experimentation to demonstrate how these new small payments can be applied to apps in other ways.

Lightning’s leverage

First and foremost, many apps are taking advantage of the low fees allowed by the lightning network.

“With Paypal, you couldn’t really send an amount as low as 1,000 satoshis – or $0.06 – because their fee is higher than that,” Rui Gomes, a developer at Lightning Spin, an online gambling app running on the lightning network, told CoinDesk.

Plus, Gomes argued, when it comes to online casinos, smaller fees are what keep the business alive, since the company can charge a small fee on every play in order to keep a consistent revenue stream.

Lightning Spin also showcases how the lightning network can enable faster payments.

With Bitcoin by itself, users still had to wait for miner confirmation on their transactions and so couldn’t cash out immediately. But with lightning, real-time payments are a breeze, as long as users already have a payment channel (or a connection with other peers on the network) established.

“I’ve built [Lightning Spin] with the sole purpose of demonstrating that it is possible to have a betting game where you can deposit and withdraw your earnings instantly,” Gomes concluded.

Another advantage of using Bitcoin-based payment technology is that the companies launching these applications then have more control over the development.

While Visa, for instance, offers a way for developers to integrate payments into an app, users need to register on the website, which means Visa has some level of control over who uses their system.

Speaking to this, David Knezic, who developed a lightning app that he presented at a recent “hackday,” said:

“Bitcoin payments can be integrated by anyone into anything without ever having to ask for permission – unlike many other systems.”

From cute to futuristic

With that freedom, developers are envisioning applications that range from the silly and sweet to the sci-fi.

Knezic’s recent contribution to lightning development is a candy dispenser that spills out M&Ms when sent a lightning payment. According to him, the fun project was meant to show how Bitcoin payments can reach beyond the digital realm.

And while that’s probably not lightning’s “killer app,” what has taken hold among lightning users is a digital artboard.

Called Satoshi’s Place, the application allows users to send a small lightning payment to purchase and paint single pixels (or the whole board for roughly $65) on an online canvas. The application garnered huge amounts of attention in June as it became a magnet for a mixture of vulgar graffiti, memes and cryptocurrency symbols which displayed the territorial battles that continue to rage in the space.